Long wait ahead for new retail stores at Chennai airport

Retail outlets add to the non-aeronautical revenue of the airport and the new tender was expected to generate more money as the space and fee were higher than existing contracts.TNN | August 22, 2017, 11:56 IST

CHENNAI: The wait for new branded and multi-brand retail stores at the Chennai airport is set to get longer as the AAI has scrapped a tender finalised after a delay of four years, following a court order. Though new terminals were opened in 2013, the airport is yet to get new retail shops which could generate around 5-10% of the total non-aeronautical revenue. The Madras high court has asked AAI to call for a fresh tender after it found out that clauses were violated.

“There will be a minimum delay of six months to complete the tender process and identify a contractor who will rope in brands to set up retail shops. The legal case is expected to drag on if the concessionaires go on appeal. It is going to be a long wait,” said AAI officials.

Retail outlets add to the non-aeronautical revenue of the airport and the new tender was expected to generate more money as the space and fee were higher than existing contracts. A request for proposal was called to design, finance, build, operate and maintain retail outlets in a 1,000 square metre area in 2015. The contract was for three years. The tender envisaged payment of a monthly guarantee of Rs 1.44 crore or 13% of the monthly net sales, whichever is higher.

Tender formulation got delayed because initially companies were not happy with the space allocated for shops. A few retailers who moved from the old terminals are continuing under extension. As their presence is temporary, many of the outlets have invested in smaller units.

Under the current arrangement, the AAI has contracts with individual companies to set up retail outlets. The new contract was aimed at roping in a company which will be responsible for attracting multiple brands with focus on aesthetics in tandem with the large steel and glass terminals opened in 2013.

“The idea is to appoint a master concessionaire because it will have more expertise than AAI officers to select the brands, space and design according to international practice,” said a senior official.

However, there were some problems with the size of the units earmarked for shops at the terminals. A few companies were of the opinion that the size of the individual space proposed to be allotted did not suit their requirements. This was also a problem which cropped up when food and beverages contracts were awarded.

Existing retail shops bring in approximately Rs 12 crore per year to AAI. The airport earns around Rs 200 crore in non-aeronautical revenue annually.

AAI is looking at retail, duty free and other commercial contracts as a means to improve non-aeronautical revenue as the Chennai airport suffers from shortage of land to boost its revenue. Though airports around the world are looking at establishing hotels and lounges to add income, Chennai has only parking, food retailers, duty free and retail shops for this purpose.

"We have a limitation in space because more land cannot be added on the city side. But we will add more shops and advertisements to boost non-aeronautical revenue. Hotels and commercial complexes can be built only after land is made available by the state government," said a senior AAI official.